Abolition of ground rents moves a step closer but only on new property

Currently, a Leasehold Reform Bill is being debated in parliament that will abolish ground rents charged on all new build property.

Not to be confused with standard monthly rent paid to the owner of the property, ground rent is a rental charge attached to the ground on which the property sits. It is paid annually or half-yearly, and failure to pay can result in the freeholder seeking to obtain possession.

The Leasehold Reform (Ground Rent) Bill will put an end to ground rents for new, qualifying, long residential leasehold properties in England and Wales. This is part of the most significant changes to property law in a generation.

It will be the first of a two-part legislation to reform the leasehold system. This Bill will mean that if any ground rent is demanded as part of a new residential long lease, it cannot be for more than one peppercorn per year (notional value) meaning that future leaseholders will not be faced with financial demands for ground rent. The Bill also bans freeholders from charging administration fees for collecting a peppercorn rent. Fines of up to £5,000 will be levied on freeholders that charge ground rent in contravention of the Bill. 

Some leaseholders have experienced ground rents doubling every ten years on top of their mortgage and any service charges, with no prospect of ever selling the property on. Their only way out has been to buy the freehold, only to discover this is yet another area targeted by the profiteers.

Developers, including some household names, have been selling newly built flats (and houses) as leasehold, creating high annual ground rents and including provisions in leases for the rent to be increased – sometimes doubled – after a certain period of time. A number of buyers of this type of property have, quite often, been told by the builder that they would be given the opportunity to buy the freehold at a later time before the builder developing the site, only to find that, when they try to buy the freehold, the builder has already sold it to an investment company. Critics of the bill are rightly complaining that it does not go far enough, because existing leaseholders are not included in the new Bill as it is currently structured.

6 Steps To Buying Your First Home In 2021

Posted on 7 January 20214 February 2021

If you are determined 2021 will be the year you buy your first home, the sooner you start the process, the better.

There is a lot of work to consider when looking to buy property, especially for the first time, but it is helpful to break it down into steps. It will not surprise you to learn that many of the steps are focused on your finances, and your ability to pay off a mortgage associated with buying a home.

Work out how much of a deposit you need

The larger the deposit you have to offer, the more appealing the mortgage offer you will receive. Therefore, you need to plan to save as much as you possibly can.

In 2021, it is hoped there will be more 10% mortgages available for home buyers, so if this is in your budget, you have a good chance of stepping onto the property ladder this year.

See what help is available and take what you can

First-time buyers need help, and it is pleasing to know there is a range of saving schemes and plans on offer. The Help To Buy scheme has assisted many buyers to afford a reasonable deposit, making the mortgage process simpler.

If you are in a position where you can receive help from family members, it makes sense to do so. Not everyone has this option, but if you are fortunate enough to have this support, it can make buying your first home much easier.

Be clear on what you can afford to borrow

While buying a home is exciting, you cannot allow yourself to get carried away. You must be clear on what you can afford to borrow.

This means being clear on what you will pay back over time, and each month. If your job is in a precarious position this year, you need to consider what will happen to your mortgage payments if you are unable to pay the bill each month.

Review your mortgage options

Not all mortgages are equal, and some mortgages might be more appealing to you than others. Finding the right mortgage for your needs is crucial, and this is why getting help from professionals make sense.

Working with a mortgage broker will ensure you receive up to date information, and that you will feel confident about examining all the options available to you.

Agree a mortgage in principle

Agreeing a mortgage in principle helps you look at homes with confidence. It also sends out the right signal to vendors and the professionals representing them. By having a mortgage agreed in principle, you position yourself as a serious buyer, and this can help you be the preferred buyer for a vendor.

Find the home you love and make an offer

Once you are confident about having the finance in place to buy a property, you can search with great intent. Once you find a home you love, and you view it on a number of occasions to ensure you feel confident about the process, you can instruct your professional to place an offer on the home.

If your offer is accepted, the legal process can begin. With a bit of luck, you will be entering your first home before too long.

While there are new challenges to overcome in the housing market, people shouldn’t consider arranging a mortgage to be an impossible task. However, it is vital people accept help and assistance from professionals in the field. If you are keen to arrange a mortgage, speak to a mortgage broker or experienced adviser and make sure you are fully equipped to make an informed decision.

Tag: Property